Trade deficit as a key driver of the balance of payments imbalance in the Republic of Serbia

A balance of payments imbalance can arise for various reasons and under the influence of a large number of factors. The economic reality of national economies indicates that the balance of payments position of a country is largely determined by the trade balance. Economies that are characterized by a trade deficit in most cases are simultaneously faced with an imbalance in the balance of payments. If the persistent balance of payments imbalance results predominantly from the negative foreign trade exchange, it is a serious problem for economic policymakers, since it is necessary to implement significant long-term measures to eliminate it. The main goal of the research is to establish how the decades-long presence of a trade deficit affects the balance of payments position of the Republic of Serbia. The research results suggest that the trade deficit is the most significant cause of the balance of payments imbalance in the Republic of Serbia. At the same time, the research provides significant implications for the creators of economic policy, since in the current conditions, the balance of payments position of the Republic of Serbia can primarily be improved by implementing structural changes aimed at encouraging exports and improving the competitiveness of the domestic economy.